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T-Mobile’s new Value plans ramp up prepaid effort

If T-Mobile has its way, the lines between prepaid and contract will be forever blurred. Last year America’s No. 4 carrier made waves about removing device subsidies and working with more straight forward service plan scheme. This week they’ve not only changed their prepaid plans, but also the plans that used to be postpaid. There is no longer a contract with these plans, though there is a credit check, giving them one of two criteria we value. At the same time, the credit check is there for good reason: they have great handset financing deals that will work out better for you than subsidy pricing with other carriers.

T-Mobile’s new plan starts at $50 and provides unlimited talk and text, plus 500MB of high-speed data — LTE for those eligible and HSPA+ elsewhere. T-Mobile hopes to cover 200 million people with LTE later this year, so that could be an interesting proposition.

More interesting than the already cheap $50 plan are the add-ons. For an additional $10 you can add 2GB of data, giving you 2.5GB total. With either plan, you can tether your smartphone to a laptop or tablet at no additional cost; it just counts against your total. For $10 on top of that you can add unlimited high-speed data. Tethering is available for 500MB of that, and you can buy additional tethering allotments.

This pricing scheme puts T-Mobile more in line with prepaid carriers, rather than its traditional postpaid rivals. Another area where T-Mobile will be compared to prepaid carriers: device pricing. There are no longer subsidies available. Instead you are on the hook for the entire price of the phone. That might seem steep, since many new high-end smartphones cost $650. But you don’t have to pay all that up front.

T-Mobile is offering what amounts to zero-percent financing on handsets. For instance, when it launches the Samsung Galaxy S4 in May, customers can pay $100 down and then $20 per month for 24 months. That comes to $580, the same price you can pay up front for the S4. That’s actually less than the suggested retail price, so it does appear that T-Mobile is eating some of the cost here as well.

While we have seen a few prepaid carriers offer handset financing, none has been as user-friendly as T-Mobile. Cricket, for instance, requires that phones be paid off in 90 days, else the customer incurs finance charges. And as we saw with Virgin Mobile‘s handset financing plan, Cricket’s is one of the more user-friendly plans. T-Mobile has essentially swooped in and provided much, much more value. In fact, there is little reason to pay full price up front, given the time value of money.

It’s unlikely that these new plans power T-Mobile to the No. 3 position, even with the considerable subscriber influx from the potential MetroPCS merger. But in revealing these plans they are playing to their strength. While they have bled postpaid customers for two years now, they’ve consistently gained in prepaid. By offering these new Value plans, without subsidies and contracts, they are fortifying the part of their business that has kept them afloat. Given their strength as a carrier, it could lead them to corner their own section of the market and make them less vulnerable to movement by the three companies ahead of them.